MACDC Legislative Campaign Yields $2 million

Small businesses throughout the Commonwealth will have expanded access to high quality business support services thanks to recent funding approved by the Massachusetts Legislature and Governor Patrick.

The FY 2014 Supplemental Budget bill recently signed into law includes $2 million for the Small Business Technical Assistance (SBTA) program administered by the Massachusetts Growth Capital Corporation (MGCC). The funding appropriation follows a major campaign led by MACDC and its members to secure stable funding for this highly successful program.

The SBTA program was originally created in 2006 with an appropriation of $2 million in that year’s economic development legislation signed into law by Governor Romney. A few months later, then-candidate Deval Patrick promised at the MACDC Convention that he would fund the program in his budget every year, for each of the two terms he hoped to serve. For seven years, Governor Patrick was able to keep that commitment, even during the budget challenges spawned by the Great Recession. Since 2010, the Governor has funded the program off-budget with MGCC capital, but now for the first time in several years, the program will be fully funded through state appropriations. Eight years later, the Governor’s pledge as a candidate has been fulfilled.

Such funding is well deserved given the outstanding track record of this program. Last year, MGCC allocated $700,000 and achieved a tremendous return on investment with more than 900 businesses receiving help with business plans, financial accounting, marketing, permitting and access to capital. These businesses created nearly 500 jobs and preserved another 300 jobs. One of those business owners, Josiah Mayo, co-owner of Chequessett Chocolate on Cape Cod, spoke at MACDC’s Lobby Day last month.  With an increase in funding, MACDC is confident that these numbers will be even higher next year.

The success of this campaign is due, in no small part, to the amazing champions we had throughout the legislative process. Representatives Kulik, Peake, and Wagner played leadership roles in the House, while Senators Flanagan, DiDomenico, Donaghue, and Dorcen Forry led the charge in the Senate. Dozens of other elected officials also weighed in at critical moments. And, of course, this funding would not have been achieved without the support of Rep. Brian Dempsey, Chair of the House Ways & Means Committee, Senator Stephen Brewer, Chair of the Senate Ways & Means Committee, Speaker Robert DeLeo, and Senate President Therese Murray.

MACDC also recognizes the terrific work done by our members and other nonprofit organizations that held dozens of meetings with their legislators both in their districts and during the MACDC Lobby Day on April 16th.  MACDC also greatly appreciates the highly professional advocacy work done by our colleagues at O’Neil & Associates, Matt Irish and Chris Niles. They helped shepherd this proposal throughout the legislative process.

Update: The Jamaica Plain Forum recognized MACDC's successful campaign in a recent e-newsletter. 

For the three dozen Massachusetts CDCs that recently received notification that they are recipients of Community Investment Tax Credit (CITC) allocations, this is a time of challenge – and significant opportunity.

As you certainly know if you are one of those CDCs, you now have until the end of 2014 to get individuals and companies to make highly tax-advantaged gifts to support you and your projects. There are several challenges facing the CDCs attempting to attract these donations:

1. The tax credits are complex to explain. On top of that, there’s a too-good-to-be-true aspect to these incentives, which may make people suspicious. How can you effectively get your message out to prospective donors?
2. CDCs may have some people and institutions in the community who know you and are supportive, but they probably do not think of CDCs as a destination for significant charitable gifts. How can you convert a friend who currently gives you $1,000 to sponsor your annual event into a $10,000 or $20,000 donor?
3. Your community is full of people and businesses who would love to take advantage of the tax credits, but you don’t really know them and they don’t really know you. How can you befriend these possible supporters and get them to commit to a major gift? And how can you do that in such a short period of time? (This feels like speed dating!)

The pressure to get these credits issued within the short 2014 time frame – and to get them issued early enough in the year to allow you to receive more credits in January 2015 – is creating a sense of urgency. But even as you are chomping at the bit to get these gifts in hand, keep in mind both the short-term challenge – to raise a significant sum in a hurry – and the long-term opportunity – to build relationships that can help you next year, the year after, and even after the end of the projected six-year life of the CITC program.

One important suggestion: In your urgency to reach out to donors, don’t rely on sending letters. In-person visits are significantly more effective than mailing out a letter or an email. In-person visits allow the prospective donors to ask questions and to focus on what this program is all about. It gives them a chance to get to know you and your CDC. Letters are fine for routine appeals from organizations people know well and are used to supporting. That’s not the case here. This is an unusual appeal from an organization that probably is not high on the donors’ list of philanthropic priorities. The donors have to get to know you. They can best do that in person.

A second suggestion: Create a plan that both meets your short-term needs and promotes your long-term opportunities. There are two wonderful aspects to the CITC program: 1) if successful, your CDC will get a significant injection of capital, and 2) you have an excuse to build important charitable partnerships in the community. Those partnerships will take some time to develop. So in this first year, depending on your unique situation, you might want to maximize the offer by United Way for (let’s say) up to 1/3 of your tax credit allocation (see graph below), while you patiently go about developing relationships with individuals and businesses.

So take a deep breath. Think both short- and long-term. And get to know people face to face. You’ll find this sort of fundraising more fun than you fear, and remarkably important for the future of your organization.   

Let’s say you are already comfortable with these fundamentals and you are getting started on this six-year journey to significantly improve your revenue model. How do you prioritize between approaching foundations, individuals or local businesses for support?  Importantly, how should you think about using the services of intermediaries such as wealth managers? Below is a simple list of questions to ask yourself.

• What is the likelihood an approach to this prospective donor (or connector to a donor) will result in a 2014 gift?
• What is the likelihood we can build a relationship with this prospective donor that outlasts the tax credit program (i.e. it is not motivated 100% by the tax credit)?
• What is the likelihood we can obtain a sizable gift from this donor without needing to utilize the tax credit allocation?
• How likely is it that this donor may become a connector to other prospective donors – reducing our donor acquisition costs over time?

It would be convenient if you could simply develop a numerical score for these questions, calculate the total and go with the highest score. Of course it isn’t quite that simple because each organization is starting from a different place and with differing skill sets and networks. An organization with a $1M annual budget seeking to raise $120,000 is in a much different place than one with an $8M budget seeking to raise $200,000. Also, to a certain degree you will be guessing about the capacity and interest and motivation of your potential donors. This is not an activity with a lot of certainty.

Nevertheless a few common threads will often surface in addressing the questions. First, while intermediaries such as wealth managers will theoretically expand your donor pool a great deal, they will also act as a relationship filter – or even a relationship wall – between you and the donor. Thus, intermediaries should largely be seen as supports for your short-term or at most medium-term motivations. You don’t want all the clients of well-intentioned wealth managers to cease being donors simultaneously at the close of the program. Second, a foundation is required to make grants each year and as such doesn’t need the tax credit incentive to “get in the game.” The foundation will continue to have this mandate once the tax credit program has ended. There may be a fit for foundation giving in certain circumstances, but be cautious about your approach and clear on why you are approaching a foundation rather than individuals or businesses. A more exciting role for a foundation would be to provide a gift for your campaign but publicly announce its intention to forego the tax credits in order to make them available to donors with state tax liability – a truly charitable act!

By the end of a few years, you will have built up a pool of individual and business supporters who have gotten accustomed to writing significant checks to your CDC – and it is those people who may well continue to support you long after the tax credit program concludes.

Alan Cantor (al@alancantorconsulting.com) is principal of Alan Cantor Consulting LLC and Gregg Davis (gregg@impactconsults.com) is owner of Impact Consults. 

On Monday, June 2, 2014, the Massachusetts Housing Investment Corporation will honor three MACDC members – Harborlight Community Partners, Homeowners Rehab and Urban Edge – with “Excellence in Community Development” awards at MHIC’s annual meeting. The executive directors from each organization will be on hand to receive the award, which recognizes the honorees’ enthusiastic and exceptional commitment to community development. The annual meeting will take place at the Omni Parker House Hotel in Boston.

A full list of past Excellence in Community Development Award winners can be found on MHIC's website. 

Denise Coyne, COO of Greenfield Savings Bank, celebrates with John Waite, Executive Director of Franklin County CDC, their increased support of Franklin County CDC through the CITC program.  With the CITC program, Greenfield Savings Bank tripled their contribution from 2013 to Franklin County CDC.

The enactment of the Community Investment Tax Credit in 2012 represents the biggest new public/private investment in Massachusetts Community Development Corporations in a generation. It is also part of a larger strategy to refresh, re-energize, and expand the community development movement to meet the challenges of our times. CITC is being watch locally and nationally as a possible model for how to systematically strengthen the community development sector. So, nearly two years after enactment, how is it going? Here are seven of my “first impressions:”

1. Last minute legislative changes made the program stronger:  MACDC’s original legislative proposal called for the tax credit to begin in January 2013 with $2 million in credits, then $4 million in 2014 and $6 million in 2015 and beyond. The Legislature modified the plan by providing $1.5 million in start-up grants for 2013 and then $3 million in tax credits in 2014 and $6 million in 2015 through 2019.  While Governor Patrick cut the grants to $750,000 (demonstrating one of the key advantages of tax credits over appropriations), the start-up grants did allow DHCD to put resources into the community quickly so that CDCs (and MACDC) could engage in critical planning and preparation work prior to the roll out of the tax credit program. The Legislature also modified our proposal, at the recommendation of the Department of Revenue, to make the credits refundable rather than transferable – simplifying the program tremendously and expanding the range of potential donors. I wish we had thought of these ideas ourselves, but we are thankful that the Administration and the Legislature made the program even stronger.

2. Rolling out a new program takes time:  The Legislature was also wise to delay the implementation of the tax credit until 2014 because we needed every one of those extra months (and then some) to get the regulatory infrastructure in place.  Both DHCD and DOR had to develop regulations and guidelines for this new program and it has taken significant time to do so. While I think things could have moved faster, I have come to accept the reality that bureaucracies move slowly for a reason and that tax credits need to be designed carefully to avoid unintended consequences. Creating a fair application procedure, appropriate reporting requirements, and clear procedures for processing transactions has taken a while, but now that these things are in place the program should move forward smoothly.

3. Community Investment Plans Matter – The CITC is built around the requirement that DHCD award tax credits based on the quality of the Community Investment Plans submitted to DHCD. The two most important elements in these plans, according to DHCD’s scoring rubric, are community engagement and organizational track record. Tax credit allocations ranged from $50,000 to $110,000, so it’s clear that the quality of the plan matters. Over time, we expect to see the quality of these plans improve, as well as the ability of CDCs to execute their plans and measure results. We will begin to see how this is playing out with the second CITC RFP later this year and the first year reports in 2014.

4. CITC is pushing CDCs and MACDC to sharpen our message: One of the reasons that we structured this program as a tax credit for private donations was to incent and reward CDCs to become more effective at telling their story. Over the past year, we have held several trainings on this topic and we have seen CDCs invest in new marketing materials, websites, and data systems. MACDC itself developed a new “theory of change” to more effectively talk about the diverse work of our members and we completely revamped our website.

5. Large corporations seem less interested than small businesses and individuals: So far, the major financial institutions that have been the field’s biggest private supporters have not yet jumped into the CITC pool. These national banks don’t yet have the systems in place to allocate the future tax savings back to the local philanthropy budget. By contrast, community banks, smaller businesses and individuals have an easier time seeing the tax benefits and translating those benefits into larger donors. That said, the first large financial institution to figure this out will have a major competitive advantage over the others.  Who will that be?

6. CITC opens doors and ears, but will it open wallets?  For the past year, MACDC has been reaching out to donors, donor advisors, accountants, lawyers and others to educate them about the tax credit and how it can help high net worth individuals and companies increase the impact of their philanthropy. We have found many of them to be very interested in this new tool and we have met with dozens of people who might otherwise not be that interested in hearing our pitch. The question remains whether these meetings and conversations will translate into actual donations, but we are optimistic that CITC will achieve one of its key goals – attracting new donors to the field.

7. Different strokes for different folks: Much as we expected, CDCs are deploying different strategies to find donors to use their credits. Some CDCs are focusing on smaller individual donors, others on larger, five-figure donations; some are looking to community banks while others are talking to construction companies, law firms and other vendors active in the field. While most CDCs transferred the maximum of 50% of their allocation to the United Way’s Community Partnership Fund, several others transferred less or none of their credits – confident that they can find enough donors to use all of their credits (a total of $1.1 million was transferred, giving the United Way the opportunity to raise $2.2 million). Many CDCs are using credits to enhance sponsorships and donations associated with annual meetings and fundraising galas. Perhaps the most challenging question for CDCs has been whether to focus on getting existing donors to step up with larger donations or whether to take the extra time to solicit new donors – or some combination of both. We have also been pleased to see many CDCs engage their board members in this process, providing them with training on how to raise money and in one case, having the board run a “phone-a-thon” to call over 100 prospects in a single evening.

The CITC program is very much a work in progress. We should expect some confusion and even some stumbles, but I remain confident that over time the program will become easier and more predictable to use (for donors and CDCs alike) and that it will have the desired impact of meaningfully improving communities and the lives of the people who live there. 

A ribbon cutting ceremony was held on May 13, 2014 to mark the completion of the beautiful, $9.8 million Benfield Farms development in the Town of Carlisle. The ceremony marked the culmination of more than 10 years of work by the community and the first affordable project in more than 34 years. The long-awaited development of Benfield Farms, 26 units of affordable, age-restricted rental homes, is especially important to many seniors who need affordable housing in order to stay in their community. NOAH (Neighborhood of Affordable Housing, Inc.), the Carlisle Housing Authority and the Town of Carlisle Affordable Housing Trust Fund collaborated for five years to plan the sustainable housing community located at 575 South Street in Carlisle. The project began construction April 2013, was completed in February 2014 and began occupancy March 1, 2014. It brings the town full circle from the decision to buy the land in 2004 to occupancy in 2014.

Benfield Farms is a bucolic 4.4-acre site framed by wetlands, an open meadow, and forest, located on the scenic road of South Street, about two miles from the center of Carlisle, a small rural community. The 26 units, in 28,160 square feet, are a mix of 17 one-bedroom units and nine 2-bedroom units that will be rented to households over the age of 62. These efficient apartments utilize the principles of universal design for seniors and the latest in energy efficiencies to provide climate control and lower energy costs. The building has three meeting spaces, an exercise room on the second floor, and a library and porch on the third floor. 

Benfield Farms will be a model of sustainable development, thanks to the ongoing assistance of Kim Vermeer of Urban Habitat Initiatives. Working closely with the Town of Carlisle, NOAH planned the project to minimize its impact on the 45-acre site. The completed building is eligible for LEED for Homes Certifiable at the Gold level and will seek certification from USGBC. Benfield Farms uses less than 10% of the site, and is located near the road to reduce paving and other infrastructure. 100% of the storm water will be channeled away from wetlands and used to recharge groundwater. Landscaping is designed with native, drought-tolerant plants that will not require irrigation once established. An all-electric heating and cooling system provides high efficiency energy and, to save on the future costs of electricity, the project is investing in a solar PV system. 

NOAH, a 26-year-old nonprofit community development corporation based in East Boston and MACDC member, served as the developer. Throughout the process, NOAH worked with the design team of DiMella Shaffer Architects (DSA), civil engineers Meridian Associates, and general contractor Dellbrook Construction. Peabody Properties serves the property manager and leasing agent for the project. The 4.4-acre site will continue to be owned by the Carlisle Housing Authority, which holds a 99-year lease with Benfield Farms LP. 

Affordable housing would not be possible without the public-private partnership of the funding programs that combine federal, state, and local funds with private sector investment. NOAH obtained an allocation of federal Low Income Housing Tax Credits and other soft loans from the Department of Housing and Community Development (DHCD). Bank of America Merrill Lynch purchased both the federal and state Low Income Housing Tax Credits with close to $6 million in equity and a construction loan of $6,650,000. Mass Housing Partnership is providing a permanent mortgage of $1,450,000, which will go into effect once all the units are occupied. Town Community Preservation Act Funds were used as a $425,000 loan for the project in addition to the $2 million for the initial purchase of the Benfield property.

No one said affordable housing is easy; it takes a supportive village, patient developers, and creative financing.

The Massachusetts Department of Revenue has issued draft regulations for the Community Investment Tax Credit program (proposed regulations at 830 CMR 62.6M.1. Assuming the regs when adopted stay the same as the draft, they create some important incentives to taxpayers and donors who want to invest in their communities. For example:

• You do not need to be a resident of Massachusetts to make a donation and obtain a credit. In fact, you do not even need to have Massachusetts taxable income. [Section 830 CMR 62.6M.1(13)]. Since the credit is refundable, if someone wants to make a donation to a community development corporation that has been allocated credits, he may do so, file a return, and receive 50% of the credit back as a refund from the state. The total donation is treated as a charitable donation for federal tax purposes. However, be aware that the refund will likely be treated as income for federal tax purposes when filing in the following tax year.
• The clear winner is a donor who has Massachusetts income and whose donation approximates her tax liability. If Donor A has tax liability of $2,500 and makes a donation of $5,000, she will receive a credit of $2,500 eliminating her state tax liability and, as noted above, may claim the total donation as a charitable gift on her federal return. Since her tax credit offsets her Massachusetts income, the credit is not treated as income for federal tax purposes.
• Corporations, partnerships and limited liability companies are also eligible to claim the credit. If the entity is a “pass through” entity and not taxed at the entity level, the credit is passed along to the owners pro rata or based on an executed agreement documenting an alternative distribution method. [Section 830 CMR 62.6M.1(10)(a)].
• Nonprofit organizations that are tax exempt under IRC 501(c)(3) may contribute to a community development corporation and receive either a tax credit (eg. if the organization has unrelated business income), or the refund.

A word of caution to businesses that wish to donate and have a business relationship with the community development corporation: the contribution will only qualify if it “is not in any way an element of or contingent upon such contractual relationship [with the CDC] or upon its continuation.” [Section 830 CMR 62.6M.1(15)(b)]. If there is a business relationship between the donor and the donee, the donor must disclose that when it applies for the tax credit.

For more information, check out the Massachusetts Association of CDCs website at http://www.macdc.org/community-investment-tax-credit. You can access the list of qualified community development corporations at http://www.macdc.org/2014-citc-allocations.

Felicity Hardee is an attorney in Springfield, Massachusetts who represents affordable housing developers and lenders in the development and financing of housing for low and moderate income individuals, families and seniors. She assists clients with closings involving multiple financing sources, including Low Income Housing Tax Credits and HOME, HSF and HIF financing.  She serves as the President of Valley CDC and the Treasurer of Community Legal Aid.

Constructing affordable housing units is never easy, but it is always worth it.

The Great Cove Community in Mashpee is a perfect example. In 2001, the first feasibility study for the proposed housing development took place. Thirteen years later, the project was completed, bringing 10 affordable rental units to the Upper Cape.

Rick Presbrey, CEO of Housing Assistance Corporation, said during the ribbon-cutting ceremony last month that time should be taken to acknowledge the efforts that went into making the project a success. “First, we are celebrating the accomplishment here today, which is a big deal because these things take years, literally years to do,” he said.

By all estimates, the wait was well worth it. Nearly two dozen people attended the event – Mashpee Town Manager Joyce Mason; Chair of the Mashpee Board of Selectmen John Cahalane; Leila Botsford, executive director of the Mashpee Housing Authority; and Nancy McCafferty of the Massachusetts Housing Partnership, were among the notables – and they were impressed with the quality craftsmanship that went into the townhouse units.

Consisting of eight 2-bedroom units and two 3-bedroom units, Presbrey commented on their attractiveness. “It’s not too cramped and the inside of the units is finished exceptionally well,” he said. “I think the thing you noticed is the flooring, the colors of the wall, and the kitchen cabinets are really, really fantastically appealing… What has happened here is we have the right builder in The Valle Group that will not lower their standards for something like this.” Mashpee families will fill seven of the units and eight of the 10 will be dedicated to those who earn 30 percent of the area median income or less.

Great Cove was funded and built through a collaboration of multiple local and regional agencies including the Mashpee Housing Authority, the town of Mashpee, HAC, the Cape Cod Commission and the Massachusetts Housing Partnership.

The Yarmouth Port-based firm of Brown, Lindquist, Fenuccio & Raber Architects designed the units with The Valle Group of Falmouth, constructing them and Horsley Witten Group serving as the civil engineer and landscape architects.

Located on Breezy Way off Old Barnstable Road, the development is located a few hundred yards away from Mashpee High School, which provided an additional benefit to the town. “One of the really unique elements of this project is not only does it increase the affordable housing stock on Cape Cod, but the town was also able to improve the water quality as well by connecting the wastewater discharge of this project to the existing high school,” Brian Kuchar of Horsley Witten said.

As to how badly the project was needed, Presbrey told those in attendance that during a lottery held the week before, 112 people came out hoping to move into one of the apartments. “From the point of view of a developer, that is good,” he said. “From the point of view of a citizen of Cape Cod, it’s not good.”

Paul Ruchinskas of the Cape Cod Commission piggybacked on that idea later in the ceremony, highlighting the need for more developments like this on Cape Cod. “Massachusetts is one of the highest priced states [for homes] in the country and our wages are lower. All this century, the average wage here is 30 to 35 percent lower than the rest of the state,” he said, noting that is why every affordable unit on Cape Cod is “vitally important not only for the 10 families living here and having safe, secure housing, but it’s also important to maintain the economic and social diversity of the Cape so that our workforce can continue to live here.”

To read more content like this, visit the Housing Assistance Corporation website (www.HAConCapeCod.org), follow them on Twitter and like them on Facebook.

Urban Edge recently celebrated 40 years of “leading with our heart” by hosting an anniversary event for more than 350 friends, supporters and colleagues on April 30^th. Held at the State Room in downtown Boston, the event featured Geoffrey Canada, President of the Harlem Children’s Zone, as the featured speaker and Charlotte Golar Richie as the emcee.

During the event, Urban Edge debuted their music video “Lift Me Up,” which highlights some of the organization’s accomplishments during the past four decades through pictures and music. Click play to view the video below:

Full lyrics and musician credits are available on Urban Edge's YouTube channel. Visit their website for more information on their programs.